Millman v. Dept. of Healthcare Services
Filed 2/24/12 Millman v. Dept. of Healthcare Services CA2/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
ONE
PHIL MILLMAN et al.,
Plaintiffs and
Appellants,
v.
DEPARTMENT OF HEALTH CARE
SERVICES et al.,
Defendants and Respondents.
B233526
(Los Angeles
County
Super. Ct.
No. BS120032)
APPEAL from
an order of the Superior Court
of
County. Robert O’Brien,
Judge. Affirmed.
Law Offices
of Michael J. Khouri and Michael J. Khouri for Plaintiffs and Appellants.
Kamala D.
Harris, Attorney General, Jennifer Kim, Assistant Attorney General, and Kenneth K. Wang, Deputy Attorney General,
for Defendants and Respondents.
__________________________________
Phil Millman and Chemique Pharmaceuticals, Inc. (collectively,
Plaintiffs) appeal from an order denying a motion in which they challenged the
Department of Health Care Services and its director’s compliance with a
peremptory writ of mandate issued by
the trial court. We affirm.
BACKGROUND
name="_ftnref1" title="">
Plaintiff
Phil Millman is a licensed pharmacist.
Plaintiff Chemique Pharmaceuticals, Inc. (Chemique) is the pharmacy
where Millman operates his business.
According to Plaintiffs, Chemique is “a home infusion pharmacy that
serves patients who require long-term intravenous care.”
Plaintiffs
are Medi-Cal providers. As part of the
Department’s administration of the Medi-Cal program, the Department conducts
audits of amounts paid to providers for “services provided to Medi-Cal
beneficiaries.” (Welf. & Inst. Code,
§ 14170, subd. (a)(1).)
In 2005,
the Department conducted an audit of Plaintiffs’ “Medi-Cal practices” for the
period January 1, 2003 through December 16, 2004. In performing the audit, the Department
compared records of Plaintiffs’ drug purchases with records of Plaintiffs’
billings to Medi-Cal for the dispensation of those drugs. The particular drugs reviewed were “Albutein
25% IV solution; Alburx 25% vial; Neumega 5mg vial; Neupogen 300; Procrit
40,000 units; and Zofran 2mg.”
As the trial court explained in its
final ruling on Plaintiffs’ petition for writ of mandate, “the Department
calculates the total amount of [Plaintiffs]’ billings, calculates the amount of
billings attributable to Medi-Cal and to other payors, and then determines the
percentage of total billings attributable to Medi-Cal. The Department applies the Medi-Cal
percentage of billings to [Plaintiffs]’ total inventory of a given drug to
determine how much of that drug was available for Medi-Cal billings.” If the audit reveals that the available
inventory of a drug was less than the amount Plaintiffs billed to Medi-Cal for
the drug, the Department makes a determination that Plaintiffs were overpaid
for providing that drug to Medi-Cal beneficiaries.
On or about December 28, 2005, the
Department notified Plaintiffs that it had determined based on the audit that
Plaintiffs had been overpaid in the amount of $856,466 because Plaintiffs’
inventory of the six drugs reviewed was insufficient to cover Plaintiffs’
billings to Medi-Cal.
Plaintiffs challenged the overpayment
determination through the administrative process. As the trial court stated in its final ruling
on Plaintiffs’ petition for writ of mandate:
“[Plaintiffs] timely appealed the Department’s overpayment
determination. In June 2007 and January
2008, an administrative hearing was held to determine the propriety of
[Plaintiffs]’ appeal and the propriety of [the Department’s] overpayment
determination. At the conclusion of the
administrative hearing, the administrative law judge made a recommendation
upholding the Department’s overpayment determination. [¶]
“In March 2009, the Department adopted the ALJ’s recommendation and
entered a final order denying [Plaintiffs]’ appeal and upholding the
overpayment determination in the amount of $856,466.00.”
On April 8, 2009, Plaintiffs filed
a petition for writ of administrative mandate against the Department and its
director (hereafter collectively referred to as the Department) seeking a
peremptory writ of mandate “commanding [the Department] to set aside the
overpayment determination and lift the withhold on current payments due
[Plaintiffs] for services rendered to MEDI-CAL beneficiaries.”
In their opening brief in support
of the petition, Plaintiffs raised five issues.
First, they contended that the audit was “arbitrary because the auditors
relied upon a known data entry error rendering the audit result false.” Plaintiffs asserted that the “Department
incorrectly included in their calculation, an 8,000 quantity of Albutein as
800,000 units supposedly dispensed to a single patient.” Plaintiffs argued, “since there was no
evidence that the 8,000 entry was ever disbursed to any patient, private or
Medi-Cal, the entry clearly should not have been included in the audit. . .
. [I]ncluding the mistaken entry
drastically skewed the percentage of inventory available for Medi-Cal billing;
and in turn severely overstated the alleged overpayment calculation against Chemique.” (Fn. omitted.)
Second, Plaintiffs contended that
the “Department committed a serious error of law in performing the audit and
testifying to its reliability in the administrative hearing.” Plaintiffs described the “serious error of
law” as the Department’s “withholding relevant discovery documentation,”
specifically a memorandum from the California Department of Justice regarding
its investigation of Chemique. According
to Plaintiffs, the memorandum “explains why the DOJ closed its investigation of
Chemique” and “also details the DOJ’s unfavorable review of the Department’s
audit,” including its criticism of the Department’s inclusion of the 8,000
units of Albutein even though it appeared to be a data entry error.
Third, Plaintiffs contended that
“it was an abuse of discretion to find the Department’s audit reliable when the
Department refused to consider substantial inventory purchased from
out-of-state wholesalers.” Plaintiffs
argued that “Chemique should have received inventory credit for purchases made
during the audit period from out-of-state wholesalers because the Pharmacy
Board had already made a finding that there was no violation of pharmacy law”
by Chemique when it purchased products from these wholesalers.
Fourth, Plaintiffs contended that
“it was an abuse of discretion to find the Department’s audit reliable when the
Department failed to consider substantial beginning inventory on hand before
the audit period.” Plaintiffs argued
that the “Department refused to acknowledge that there was existing, viable
inventory left over on Chemique’s shelves from 2002 [citation]. In fact, Chemique had a total of 70,343 units
of inventory on hand on January 1, 2003.”
Plaintiffs described this inventory as “12,600 units of Albutein +
25,400 units of Albumin + 7 units of Neumega + 32,336 units of Zofran . . . .”
Fifth, Plaintiffs contended that
“it was an abuse of discretion to find the Department’s audit reliable when the
audit had already been deemed unreliable by the United States Government.” Plaintiffs asserted that “Medicare” reviewed the
Department’s audit and rejected it, concluding that Chemique had not committed
any fraud.
The Department filed an opposition
brief in which it defended its audit and its overpayment determination.
On June 7, 2010, the trial court
held a hearing on Plaintiff’s petition for writ of mandate. The court issued a written tentative ruling,
which it adopted as its final ruling on the matter. The court granted the petition and ordered
that, “A writ shall issue commanding the Department to set aside its overpayment
determination and remanding the matter for the Department to recalculate the
overpayment, if any, based on the corrected entry for Albutien [sic] (i.e., 80
instead of 8,000), and to consider out-of-state inventory in its analysis.”
The trial court rejected the other
three claims Plaintiffs made (listed above), including the claim that the
Department should have included Plaintiffs’ beginning inventory in the
audit. The court stated that Plaintiffs
“had a legal obligation to provide records to the auditor. As the ALJ [administrative law judge] found,
[Plaintiffs] did not keep records from which beginning inventory could be
determined. The audit was based on the
records provided by [Plaintiffs], as verified and corroborated from the
auditor’s efforts.”
On July 9, 2010, the trial court
entered judgment and issued the peremptory writ of mandate, ordering the
Department to comply with the court’s final ruling. Plaintiffs did not challenge the judgment or
the final ruling.
On October 22, 2010, the Department
filed its return to the writ of mandate, stating that the Office of
Administrative Hearings had issued an order vacating the administrative
decision “and remanding the audit overpayment determination to the Department
for reconsideration consistent with the Writ.”
On December 10, 2010, the
Department sent Plaintiffs written notification that it had “recalculated the
audit demand amount.” The Department
explained that, “In calculating the demand amount, we recalculated the Albutein
from 8,000 units to 80 units, and considered the out-of-state inventory. The Department determined the total demand
amount to be $569,778, a reduction of $286,689 from the original demand amount
of $856,467.”
On March 3, 2011, Plaintiffs filed
a motion for an order commanding the
Department to recalculate the overpayment determination, arguing that the
Department had not complied with the writ of mandate. Plaintiffs raised three issues. First, Plaintiffs contended that the
“Department’s recalculation incorrectly calculates Albutein.” Plaintiffs asserted: “The writ instructs the Department to use the
‘corrected entry for [Albutein] (i.e., 80 instead of 8,000)’ [citation]. However, the Court’s use of the number ‘80’
was merely by example. Whether the
original data entry error read ‘8,000,000[,]’ ‘800,’ or ‘8’ does not
matter. The only fact that matters is
that the 8,000 entry was never found to have been dispensed to any patient, nor
billed to any payor, Medi-Cal, private or otherwise.” Therefore, the only correct number that
should have been used is zero (‘0’
.”Second, Plaintiffs contended that
the “Department’s recalculation incorrectly excludes known Albumin (Alburx)
inventory.” Plaintiffs argued: “The Department has continually refused to
acknowledge, at least as far as the overpayment determination is concerned, the
fact that Alburx and Albutein are essentially the exact same drug (Albumin),
simply produced from different manufacturers.
The Department’s ignorance – or conscious disregard – on this issue is
reflected by their total disallowance of any Albumin (Alburx) inventory for
[Plaintiffs] [citation]. Indeed, the
Department notes that such inventory existed, but refused to give [Plaintiffs]
credit for any because no disbursements of Alburx appeared on [Plaintiffs]’ log
of scripts during the audit period.”
Third, Plaintiffs contended that
the “Department should allocate all of [Plaintiffs] available inventory for
[Plaintiffs]’ Medi-Cal billings.”
Plaintiffs criticized the Department for allocating some of the
available inventory to Plaintiffs’ “billings to private insurance during the
audit period.”
The Department filed a brief in
opposition to Plaintiffs’ motion.
On April 5, 2011, the trial court
heard oral argument on Plaintiffs’ motion challenging the Department’s
compliance with the writ of mandate. The
court denied the motion.
name="_ftnref2" title="">
DISCUSSION
Appealable Order
We first
address and reject the Department’s argument that Plaintiffs have not appealed
from an appealable order.
A “court
which issues a writ of mandate retains continuing jurisdiction to make any
order necessary to its enforcement.” (
Supervisors (1982) 137 Cal.App.3d 964, 971; Code Civ. Proc., § 1097.) A petitioner who challenges the respondent’s
compliance with a writ of mandate may proceed in one of three ways: (1) by filing a new petition for writ of
mandate; (2) by filing a subsequent petition in the case in which the writ was issued;
or (3) by filing a motion seeking an order requiring the respondent “to
reconsider further.” (
Here, Plaintiffs chose the third option.
An order on
a motion challenging the respondent’s compliance with a writ of mandate is an
appealable order. (City of Carmel-By-The-Sea v. Board of Supervisors,
Angeles (2011) 201 Cal.App.4th 455, 464, fn. 2 [“After the entry of
judgment and issuance of a peremptory writ of mandate, an order concerning
compliance with the writ is a postjudgment order and is appealable as an order
relating to the enforcement of a judgment”]. )
Issues on Appeal
In the motion that we are reviewing on appeal, Plaintiffs
challenged the Department’s compliance with the writ of mandate. The writ ordered “the Department to
recalculate the overpayment, if any, based on the corrected entry for Albutien
[sic] (i.e., 80 instead of 8,000), and to consider out-of-state inventory in
its analysis.”
Two of the three issues Plaintiffs raised in their motion
challenging the recalculation—and raise here on appeal—are outside the scope of
the writ of mandate. Plaintiffs contend
that the Department’s recalculation should have included “known Albumin
(Alburx) inventory,” and should have allocated all of Plaintiffs’ available
inventory for Medi-Cal billings rather than allocating some of the available
inventory to Plaintiffs’ billings to private insurance.
When the trial court issued the writ of mandate and
ordered the Department to recalculate the overpayment with two new parameters
(the corrected entry for Albutein and the inclusion of inventory from
out-of-state wholesalers), Plaintiffs did not challenge that decision in the
trial court or in this court. Plaintiffs
did not ask the trial court to reconsider its ruling and order the Department
to include known Albumin (Alburx) inventory or allocate all available inventory
to Plaintiffs’ Medi-Cal billings.
Plaintiffs did not appeal from the judgment.
Thus, Plaintiffs have waived these two issues. Neither is a proper basis for challenging the
Department’s recalculation of the overpayment.
(See City of Carmel-By-The-Sea v.
Board of Supervisors, supra, 137
Cal.App.3d at pp. 970-971 [by failing to appeal from the judgment granting a
peremptory writ of mandate the Board “waived its right to appeal from those
portions of the writ with which it voluntarily purported to comply” even though
there were further proceedings in the trial court regarding the Board’s
compliance with the writ and the Board properly appealed from the order finding
that it failed to comply with the writ].)
Plaintiffs contend that the
Department failed to comply with the writ of mandate because the Department
used a “corrected entry” of 80 units of Albutein in place of the erroneous
entry of 8,000 units of Albutein.
Plaintiffs assert that the Department should have used a “corrected
entry” of 0.
As set
forth above, the trial court’s writ of mandate ordered “the Department to
recalculate the overpayment, if any, based on the corrected entry for Albutien
[sic] (i.e., 80 instead of 8,000) . . . .”
Plaintiffs argue that the “court’s use of the number ‘80’ was merely by
example,” and that the Department should have figured out that the correct
number was 0. We reject Plaintiffs’
argument for three reasons.
First, the
abbreviation of the phrase “for example” is e.g., not i.e. “I.e.” is the abbreviation for the Latin
phrase “id est,” meaning “that is.”
(Webster’s 3d New Internat. Dict. (1976) pp. 726, 1124.) Thus, the trial court ordered the Department
to use the corrected entry for Albutein in its recalculation,
corrected entry as 80 units. We will not
presume that the court used the abbreviation for “that is” when it meant to use
the abbreviation for “for example.”
Second, we
do not believe it is reasonable to conclude that the trial court would have
left this issue to the Department’s subsequent determination. The court reviewed the evidence regarding
this particular data entry, discussed it in its ruling, and concluded that the
Department erred in using the 8,000 entry in its calculation. There would be no reason for the court to ask
the Department to determine the value for the corrected entry based on the same
evidence that was before the court. If
that evidence unequivocally showed that the corrected entry should have been 0,
as Plaintiffs contend, why would the trial court not have indicated that in its
ruling and in the writ We note that
Plaintiffs did not ask the trial court to clarify the writ and state that the
value of the corrected entry was 0.
Third, Plaintiffs do not point to
anything in the record demonstrating that the corrected entry should be 0. The evidence before the trial court showed
that the June 16, 2004 entry for 8,000 units of Albutein appeared on
Plaintiffs’ “log of scripts,” which is the document that Plaintiffs provided to
the Department’s auditor when the auditor requested Plaintiffs’ records of
prescriptions filled and dispensed from the pharmacy. Plaintiffs’ records demonstrate that an
employee entered on the log of scripts that Plaintiffs were filling a
prescription for Albutein for a particular patient on June 16, 2004. Plaintiffs presented evidence in the writ
proceeding demonstrating that, based on her review of documents provided by
Plaintiffs, the auditor came to the conclusion and “admitted to a criminal
investigator that the 8,000 entry should have been 80.” The auditor nonetheless used the 8,000 figure
in calculating the amount of the overpayment.
show that the corrected entry in the log of scripts should be 0, meaning that
Plaintiffs did not fill a
prescription for Albutein on June 16, 2004 for the patient named in the
entry, even though an employee indicated that such a prescription was filled.
Plaintiffs have not shown that the
trial court erred in denying their motion challenging the Department’s
compliance with the writ of mandate.
DISPOSITION
The order denying Plaintiffs’ motion
for an order commanding the Department to recalculate the overpayment
determination is affirmed. The
Department is entitled to recover costs on appeal.
NOT TO BE PUBLISHED.
CHANEY,
J.
We concur:
MALLANO,
P. J.
ROTHSCHILD,
J.
on appeal. Plaintiffs’ appendix is not
an adequate record for this court to review the merits of Plaintiffs’
appeal. Plaintiffs did not include in
their appendix the underlying moving and opposition papers that resulted in the
order they appeal from. The Department
filed a Respondents’ Appendix which includes the remainder of the documents
necessary for this court to decide Plaintiffs’ appeal on the merits.
denying the motion. The record does not
include a reporter’s transcript from the hearing. We do not know the trial court’s reasons for
denial of the motion.
